Chapter 2 INSTITUTIONAL PARTICIPATION IN THE HEAL PROGRAM
Chapter 2 INSTITUTIONAL PARTICIPATION IN THE HEAL PROGRAM
Institutions must meet certain criteria to be eligible to participate in the HEAL program. These criteria fall into the following categories:
Institutions that offer graduate education in the disciplines and degree programs specified below may participate in the HEAL program:
Note: Regulations, policies and procedures have not implemented allied health as active disciplines in the HEAL program.
[Sections 703(a) and 719(1) of the Public Health Service Act; 42 CFR Part 60.50]
To take part in the HEAL program, institutions must be located in a State, the District of Columbia, the Commonwealth of Puerto Rico, the Northern Mariana Islands, the Virgin Islands, Guam, American Samoa or the Trust Territory of the Pacific. Foreign schools are not eligible to participate in the HEAL program, even though some foreign schools are permitted to participatein the Federal Family Education Loan Programs (previously called the Guaranteed Student Loans) administered by the Department of Education.
[Section 799(9) of the Public Health Service Act]
A health professions school interested in participating in the HEAL program must be accredited by an appropriate accrediting body that is recognized by the Secretary of Education. If a new school has not been operating for a sufficient time to be accredited, the Department of Health and Human Services will consider the school accredited under the following condition:
The approved accrediting bodies for health professions schools are as follows:
|
Liaison Committee on Medical Education, the American Medical Association, and the Association of American Medical Colleges |
|
American Osteopathic Association |
|
Commission on Dental Accreditation |
|
American Veterinary Medical Association |
|
Council on Optometric Education of the American Optometric Association |
|
Council on Education of the American Podiatric Association |
|
American Council on Pharmaceutical Education |
|
Council on Education for Public Health |
|
American Medical Association Committee on Allied Health Education and Accreditation |
|
Council on Chiropractic Education |
|
Committee on Accreditation of the American Psychological Association |
|
Accrediting Commission on Education for Health Services Administration |
[42 CFR Part 60.50]
A health professions school that is otherwise eligible to participate in the HEAL program must enter into an agreement with the Department of Health and Human Services. The agreement must state that the institution will comply with statute and regulations governing the HEAL program. In addition, the institution must satisfy requirements with respect to discipline and degree programs offered, location and accreditation.
If an institution undergoes a change of controlling ownership or form of control, its agreement automatically expires at the time of that change. The school must notify the HEAL program and enter into a new agreement with the Department of Health and Human Services to continue participation in the HEAL program.
[42 CFR Part 60.50]
Effective January 1, 1993, any school with a HEAL default rate in excess of 20 percent became ineligible to participate in the HEAL program. There are two exceptions to this requirement:
In addition, schools have the right to appeal their ineligibility to the Department based on mitigating circumstances.
[Sections 708(b)(4) and 708(d) of the Public Health Service Act]
Schools with default rates at or below 20 percent may continue to participate in the HEAL program. However, these schools are divided into three risk categories that determine theamount of the insurance premium the borrower and the school must pay on each HEAL loan issued. The risk categories are:
See Chapter 3 Section 4A for more information on insurance premiums paid by borrowers and schools.
[Section 708 of the Public Health Service Act]
Each school's risk category is determined every September 30 by calculating the institutional default rate. The risk category becomes effective July 1 through June 30 of the following year.
The school's default rate is calculated as follows:
The total principal amount of HEAL loans made to students of a school for a period of enrollment (or expected enrollment) that entered into repayment status after April 7, 1987 for which claims have been paid due to default or bankruptcy.
Minus
Defaulted HEAL loans for which the borrower has made payments to the Department of Health and Human Services for 12 consecutive months in accordance with a repayment agreement, and HEAL loans that have been discharged due to bankruptcy.
Divided By
The total principal amount of HEAL loans made to students of a school for a period of
enrollment (or expected enrollment) that entered into repayment status after April 7, 1987.
[Section 719(5) of the Public Health Service Act]
Statute permits schools to pay off outstanding principal and interest owed by borrowers who have defaulted on their HEAL loans. Schools may use this option as a mechanism to reduce theirinstitutional default rates, thus maintaining eligibility (if the default rate is over 20 percent) or moving to a lower risk category.
[Section 708 of the Public Health Service Act]
Schools with default rates greater than five percent, but no more than 20 percent, must prepare an annual default management plan.
The default management plan must specify the detailed short-term and long-term procedures that the school will have in place to minimize HEAL defaults. Under the plan, the school must provide an exit interview to all borrowers. The exit interview is to include information concerning repayment schedules, loan deferments, forbearance, and the consequences of default. This requirement also applies to any historically black college or university (HBCU) that has a default rate greater than 20 percent and continues to participate in the HEAL program during the three-year transitional period which ends on October 13, 1995.
The Department of Health and Human Services may grant a waiver of the default management plan requirement if it determines that the default rate for the school is not an accurate indicator due to low HEAL volume.
[Section 708 of the Public Health Service Act]
Schools that take part in HEAL must observe five basic administrative and fiscal responsibilities. These consist of:
To assure that institutions uphold their responsibilities, the statute authorizes the Secretary of Health and Human Services to prescribe regulations to provide for:
[Section 715(a) of the Public Health Service Act; 42 CFR Part 60.55]
The Department of Health and Human Services supplies HEAL application forms. However, lenders and schools are permitted to print their own HEAL forms with the approval of the Department's HEAL Branch.
In some instances, camera-ready copies of HEAL application forms have been provided to large volume HEAL participants by the HEAL Branch. If the camera-ready copies are used, the only permissible changes to the form without HEAL Branch approval are the inclusion of the institution's name, address and lender or school identification code. In those cases, special HEAL Branch approval is not necessary. HEAL approval is needed for any other changes to the official HEAL application that institutions printing their own forms wish to make.
For approval, send proposed forms to:
DHHS/HRSA/BHPR
HEAL Program
5600 Fishers Lane, Room 8-37
Rockville, Maryland 20857
An institution may use the same address to request initial supplies of HEAL applications. For more forms after the initial supplies run out, institutions may call the HEAL Branch at 301-443-1540.
[42 CFR Part 60.19]
Institutions must accurately and completely fill out their portion of the HEAL application to certify that students meet the eligibility requirements for HEAL funds. Regulations also prohibit blank application forms to be signed by a borrower, a school, a lender or an agent of any of these parties.
The school certification of a HEAL loan includes supplying the institution's five-digit identification number, the borrower's anticipated date of graduation, the borrower's cost of attendance, his or her resources and need for the HEAL loan. Documentation supporting estimated costs and resources must be maintained by the school in the borrower's official records. In addition, the school must always report the estimated installment amounts of the loan and the estimated disbursement dates. (More information on disbursements appears in Chapter 2, Sections 3 and 4.)
The HEAL application form expired on October 31, 1998 since legislation to make new loans was not continued.
[42 CFR Parts 60.7, 60.51 and 60.51]
Although policy restricts HEAL loans from being authorized 60 days prior to graduation or the end of the academic year (see Chapter 2, Section 3.F.3.d, Establishing Need 60 Days Before Graduation), there is no application deadline for HEAL loans per SE. However, lenders may establish their own cutoff dates. Because situations arise in which students legitimately require assistance from HEAL funds late in the academic year, the Department of Health and Human Services insures loans if:
In these instances, disbursement must occur no later than 60 days after the end of the academic year.
An institution must verify to the best of its ability the information students supply to obtain HEAL loans. The method for verification is left to the institution's discretion. For example, the institution is permitted to use the same procedures as those required to verify applications for Title IV funds authorized under the Higher Education Act. However, schools must compare the information on the application with information on previous applications and other records provided by the student to the school. This includes information submitted to the financial aid office and other offices at the school, such as admissions and registrar. Should discrepancies exist that cannot be resolved between the school and the student, the school is obliged to notify the potential lender.
[42 CFR Parts 60.51 and 60.61]
The regulations specify that the items to be verified include--but are not limited to--citizenship status and social security number. The regulations also provide examples of how to comply with the requirement of verifying these two items. Schools may request:
Note that the institution may choose to use other forms of documentation or procedures, except for applicants who are permanent residents.
[42 CFR Part 60.51]
In these cases, the applicant must supply his or her original I-151 or I-551 card, which the school must photocopy for its own files and forward to the lender attached to the HEAL application. The photocopy must be legible. Schools should be able to determine the authenticity of the card by moving the card slightly to determine if the I-151 or I-551 is superimposed diagonally across the card in accordance with INS instructions. Schools also are encouraged to work with other offices, such as the admissions office and registrar's office, to double check the citizenship/residency status of HEAL applicants.
No other form--such as an I-94, I-688, I-689, or passport--is acceptable in the HEAL program. Further, a student with an I-151 or I-551 is not a "conditional resident." Schools can determine if an applicant is a conditional resident by checking the "Class Code" on the I-551 card. If the Class Code is listed as "CR" then the applicant is a conditional resident and is not eligible for a HEAL loan. If a conditional applicant has requested the INS to remove the "CR" status, they must be in possession of a letter from the INS stating (1) request has been approved by the INS, (2) applicant is deemed a lawful permanent resident with removal of the "CR" class code, and (3) issuance of a new class code is referenced in the letter. Applicants with any other Class Code are eligible for a HEAL loan, provided they meet the other student eligibility criteria.
Readers can find more information on student eligibility criteria in Chapter 3, Section 1.
An institution must obtain financial aid transcripts (FAT) for each school the HEAL applicant attended at least half-time. At a minimum, the FAT must include:
The purpose of collecting FATs is to determine whether the applicant is in default on any loans or owes a refund on any grants. If the applicant is in default or owes a refund, then he or she is not eligible for a HEAL loan. This means that the school may not approve the application or disburse HEAL funds unless or until the applicant has made satisfactory arrangements with the affected lender(s) or school(s) to resolve the default or refund.
Institutions may approve HEAL applications and make disbursements on the first HEAL installment without an FAT. However, the applicant must have requested that an FAT be forwarded to the institution prior to the time the school approves the application, and the institution must have received the FAT before accepting subsequent disbursements from the lender.
[42 CFR Part 60.51]
A school must not approve HEAL applications for students whom it has reason to believe may be unwilling to repay the loan.
[42 CFR Part 60.51]
F. DETERMINING THE AMOUNT OF THE HEAL LOAN
The school must identify an eligible student's need for HEAL by comparing all the financial resources of the student against the standard budget developed by the institution. In other words, the school determines the most the student is permitted to borrow under the HEAL program in a given academic year by subtracting his or her resources from the standard budget. The following equation illustrates:
Standard Student Budget
minus
Student's Total Financial Resources
equals
Amount of HEAL for which the Student is Eligible
The equation above notwithstanding, no student may receive more than the applicable legal maximum under the HEAL program (See Chapter 3, Section 2, Loan Amounts). In addition, loans generally must be disbursed in two or three installments during the loan period. More information on multiple disbursements of HEAL loans appears in Section 4 below.
[42 CFR Parts 60.10 and 60.51]
Total financial resources consist primarily of:
The school may make adjustments to the statutory need analysis formula only when necessary to reflect accurately the applicant's actual resources derived from family, spouse, or personal income, or other financial assistance that the applicant has received or will receive. This means that in addition to taking the calculated expected family contribution and financial aid awards into account to determine eligibility for HEAL funds, schools also must consider other information which the school has regarding the student's financial situation. Schools must maintain records in students' files documenting any adjustment to the need analysis calculation.
[42 CFR Part 60.51]
The standard student budget--also called the "cost of attendance"--is a required component of determining need for HEAL funds. Schools must construct standard student budgets bydetermining the costs reasonably necessary to maintain a student in a given program. Further, institutions may not use budgets for HEAL funds that differ from budgets used for other financial aid programs, such as those authorized under Title IV of the Higher Education Act, as amended, and administered by the Department of Education.
The components of a standard student budget include tuition and other reasonable educational expenses. Reasonable educational expenses consist of:
Schools must use the standard student budget uniformly and consistently. This means an institution must apply the same standard student budget for students, if they are:
As a result, all first-year medical students requesting HEAL loans for the full academic year attending the same school must have the same standard student budget. This does not mean that the budget for a first-year dental student, a third-year medical student and a fourth-year graduate student in clinical psychology at that institution has to be the same. However, the budgets for these students may not differ from other dental, medical or graduate clinical psychology students in the same program during the same loan period. Institutions must include a record of the standard budget in each HEAL borrower's file. If the school adjusted the standard budget, the HEAL borrower's file must contain the budget actually used to determine the amount of HEAL he or she may borrow.
Regulations require institutions to maintain documentation of the criteria they used to develop their standard student budgets. The documentation must be maintained in the school's general records, such as in the financial aid office's policies and procedures manual or in a separate file that is either paper-based or electronic. In any event, the information must be readily accessible for audit purposes.
[Section 715(a)(5) of the Public Health Service Act; 42 CFR Parts 60.5, 60.10, 60.51 and 60.61]
Schools may adjust the standard student budget for individual circumstances, but this authority must be used judiciously and be very well documented. The Department of Health and Human Services strongly believes that exceptions must be kept to a minimum and must be accompanied by detailed justifications, which become part of the student's financial aid file. All justifications for standard budget exceptions must be in writing and backed by at least one outside document such as a paid voucher, signed and notarized statement verifying need, or an estimate for a provider of services. Each document should be signed and dated by the financial aid administrator.
Institutions may make adjustments only to the extent necessary to assure that the borrower can complete his or her course of study. Note that schools are not authorized to make exceptions to their own established standard student budgets which would not be acceptable in other student assistance programs, such as the Title IV programs under the Higher Education Act.
For information on including the cost of traveling to residencies as part of the standard budget, see Chapter2, Section 3F3C, Travel To Residency Sites.
The rule of thumb based on regulations for making adjustments is that students in like circumstances should have like costs of attendance. Failure to comply with the regulatory requirement that a "student's estimated cost of attendance shall not exceed the estimated cost of attendance of all students in like circumstances pursuing a similar curriculum at that school" may have serious repercussions, as follows:
[Section 705(a) of the Public Health Service Act; 42 CFR Parts 60.10, 60.51 and 60.61]
The HEAL regulations require schools to use a standard student budget when determining the amount of HEAL funds for which a student qualifies. This requirement precludes the school from using a budget for the HEAL program which differs from the budget it uses for its other financial aid programs, including programs administered by the Department of Education (ED).
However, there has been some confusion in the past about whether the budget used for funds administered by ED can include living costs associated with a student's dependents as part of the so-called dependent care allowance. Schools can interpret the dependent care allowance to include costs that would offset a calculated negative available income for independent students with dependents on an across-the-board basis. In these cases, the school's policies and procedures should indicate that the standard allowance may include the deficit in the student's income. This would allow the institution to include the additional costs in the dependent care allowance without requiring documentation under professional judgement. Schools with additional questions regarding how to include living costs associated with dependents in the standard budget should refer to pertinent ED publications.
Regulations require that the transportation costs included in a student's budget, whether standard or adjusted, be "reasonable" and "directly related to the borrower's education." The Department of Health and Human Services has developed policy guidelines for institutions to determine reasonable transportation costs. These guidelines, which appear below and schools must follow, apply to the development of standard budgets as well as adjustments to standard budgets:
Reasonable costs associated with travel to residency sites are allowable as a standard budget item or as an exception to the standard budget. These can be considered a necessary educational cost since the residency site visits must occur during the final academic year and are directly related to the borrower's educational program. However, as with other budget items, schools are responsible for developing modest but reasonable allowances for this item, and must maintain documentation to support their determination.
Note that the Department of Education does not consider travel to residency sites as a permissible budget item unless the travel is a prerequisite to graduating from the academic program in which the student is engaged. As a result, institutions need to be sure that they are not creating over awards in other financial aid programs by permitting the use of HEAL funds for residency travel.
Schools may not include expenses for which the student (or other party) has already paid in determining eligibility for HEAL loans to be disbursed within 60 days of the end of the academic year. Unless there are extenuating circumstances, such as short-term loans made to cover educational expenses prior to receipt of the HEAL proceeds, costs that are already paid must be eliminated from the budget used to calculate financial need for the HEAL loan. In these instances, budget figures should reflect the true need of the borrower and can only be computed for the time remaining in the academic year or for educational expenses actually incurred, but are unpaid.
Schools may wish to inform students that they may not borrow from HEAL to cover cash advances from credit cards used to pay for educational expenses. The reason for this policy is that there is no proof that the cash advance was made to pay for educational expenses.
Notwithstanding the 60-day policy restriction on processing HEAL loans, there is no application deadline for HEAL loans per SE.
Students should not borrow HEAL within 60 days of graduation. Similarly, HEAL proceeds should not be disbursed during this time period. However, exceptions are permitted.
If a school does authorize a loan or loan disbursement within 60 days of graduation, the school must base the amount of the loan only on unpaid costs or expenses that have been covered by short-term financing arrangements which must be repaid. An example of such costs include tuition owed to the school. The school must maintain documentation of these unpaid costs. Under no circumstances may HEAL loans be used to pay for postgraduate costs, such as moving to a residency site or place of employment or setting up a practice.
The general procedures for delivering HEAL proceeds to students for whom applications have been approved are very straightforward:
HEAL funds should not arrive at the school earlier than is reasonably necessary to meet the cost of education for the period of the loan. The Department of Health and Human Services interprets "reasonably necessary" to mean no more than 15 days before the installment date requested by the school.
The school should not request the installment more than 15 days prior to the date of enrollment. If the HEAL check arrives before the student enrolls, the institution must forward the check to the student for endorsement. If the student does not enroll as planned, the institution must return the check or draft within 30 days of determining that the student is not enrolling.
Once the student has endorsed the check, the school may credit the tuition account prior to enrollment, and retain the rest until the student is enrolled. If the student has educational expenses that must be met prior to enrollment, the institution may disburse the portion of the funds required to meet these expenses. However, institutions should use caution when disbursing HEAL funds directly to students prior to enrollment because the institution is liable for refunding HEAL funds should a student not enroll as scheduled.
Note that lenders are required to report borrower's HEAL indebtedness to one or more national credit bureaus 120 days after the loan has been fully disbursed.
[42 CFR Parts 60.33 and 60.52]
The school is responsible for conducting and documenting entrance interviews with HEAL borrowers. The entrance interview must take place prior to the first disbursement of the HEAL loan in each academic year. This means that the school is not required to provide an entrance interview for second and third disbursements of HEAL proceeds in the same academic year unless the school chooses to perform additional counseling. However, if a student borrows from the HEAL loan program in successive academic years, the institution must conduct entrance interviews with that student prior to the first disbursement for each academic year in which he or she has taken out a HEAL loan.
During the entrance interview, the school must:
Institutions must conduct the entrance interview in person, either individually or in groups. Should a face-to-face interview be impracticable, an institution is permitted to conduct the entrance interview through correspondence. In this case, the institution may not disburse the HEAL check until the student returns the completed entrance interview to the school.
A sample set of entrance interview forms may be obtained by contacting the HEAL Branch at 301-443-1540.
[42 CFR Part 60.61]
Schools are required to conduct an annual workshop that informs students of the HEAL loan provisions. The workshop must be conducted at the beginning of each academic year. All HEAL borrowers attending the school are required to attend. Currently, the annual entrance interview (see Section B above) satisfies the annual workshops requirement.
[Section 715(c) of the Public Health Service Act]
Institutions must notify a lender in writing of a borrower's change in enrollment status within 30 days following the change in status. The regulations specify the contents of notification as follows:
If the school does not have a record of the borrower's HEAL lender, then the school must send the notification to the Department of Health and Human Services. The address appears below:
DHHS/HRSA/BHPR
HEAL Program
5600 Fishers Lane, Room 8-37
Rockville, MD 20857
Regulations do not require institutions to forward notifications when borrowers are on vacation from school or on leaves of absence or other temporary interruption that does not last longer than one academic term (e.g., semester, trimester, or quarter).
[42 CFR Part 60.53]
Generally, HEAL loans must be multiply disbursed in at least two, but no more than three installments for each academic year. If the loan covers a period that is equal to or less than one-half of an academic year, then a single disbursement of a HEAL loan is permissible.
Institutions are responsible for identifying on the student's HEAL application the amounts to be disbursed in each installment and the approximate dates on which the disbursements should occur. These amounts must correspond to the borrower's educational expenses for the period (e.g., semester, quarter, trimester) in which the disbursement is made. According to regulations, the lender is responsible for assuring that loan proceeds are not forwarded "earlier than is reasonably necessary to meet the costs of education for the period" of the disbursement. The Department of Health and Human Services interprets these regulations to mean that lenders generally should deliver HEAL proceeds to institutions within 15 days prior to the institutionally designated disbursement dates on the application, but no earlier than 15 days prior to the student enrollment date.
The multiple disbursement requirement is intended to assure that a borrower does not receive HEAL funds before he or she actually needs the money. This reduces the amount of interest that accrues on the loan and gives the borrower and the institution an opportunity to reduce the size of subsequent disbursements if expenses have been met by other sources or mechanisms, such as funding from less expensive sources or careful budgeting.
Although multiple disbursements are required if the loan period is more than half an academic year, multiple disbursements are not required for borrowers who apply for HEAL funds for costs to be incurred during only loan period (e.g., one semester, trimester or quarter.) If a borrower is able to wait to obtain a HEAL loan until later in the academic year, a single disbursement is permissible. For HEAL loans authorized during the last 60 days of the academic year, the loan may only cover expenses left unpaid, or paid through short-term means, at the time of submission of the HEAL application to the school. Substantiated documentation to verify these unpaid expenses must accompany the HEAL application and be maintained as part of the student's record before the institution certifies the loan application.
Some schools in the past have requested full payment of tuition and fees for the entire academic year at the beginning of the academic year, rather than distributing these costs over each semester, trimester, or quarter. For students financing these costs with HEAL loans, this practice imposes an unnecessary cost on the borrower and is not in keeping with the intent of the multiple disbursement regulations. Although the regulations allow unequal disbursements for certain circumstances such as a larger first disbursement to cover the purchase of equipment or supplies at the beginning of the academic year, the Department discourages schools from requiring full payment of tuition and fees at the beginning of the academic year.
[42 CFR Part 60.33]
A HEAL loan disbursement should not be made by the lender to the school more than 15 days prior to the enrollment date, the beginning of the loan period, or the requested installment date. Loan proceeds must be used within 30 days of receipt, with the school retaining its portion and disbursing the remaining funds to the student within 15 days of the student's endorsement. Disbursements should not occur before the student is enrolled, unless funds are needed to meet educational expenses due before the time of enrollment. Institutions should avoid pre-enrollment disbursement as a matter of good practice in case the student chooses not to enroll.
From time to time, borrowers require less or more HEAL funds than approved on their original applications. Institutions must take certain actions to accommodate either a decrease or an increase in the borrower's need, depending on the circumstance. For example, if a school certifies a HEAL application for a specific dollar amount for a full academic year based on the borrower's need, and the amount of the borrower's need decreases prior to the second disbursement, the school must notify the lender in writing of the amount of the decrease. The lender must then decrease the second disbursement amount accordingly. (Note: Borrowers needs may decrease because of receipt through the course of the academic year of additional financial aid that carries more favorable terms than HEAL.)
By accepting a second disbursement, the school is certifying that the amount of the disbursement does not exceed the borrower's need. If the school has already received the second disbursement, it must return the check to the lender so that a new check can be issued in the correct amount.
If the amount of the borrower's need increases, the original application cannot be updated to accommodate an increase in HEAL proceeds. Instead, the borrower must submit a new application for the additional amount of his or her need. At no time may a borrower receive more than the regulatory limit for the academic year.
From time to time, students withdraw, are dismissed or take leaves of absence during an academic period for which they have obtained HEAL funds. In these instances, institutions must:
The Department of Health and Human Services expects that refunds will be made within 120 days of the date of disbursement.
Schools must establish a written policy for calculating refunds. This policy must clearly establish the portion of any refund that will be attributed to the borrower's HEAL loans and the portion that will be attributed to other sources from which the borrower received aid, including the amounts borrowed from other loan programs.
Regulations require lenders to apply refunds directly to the principal, not to interest, thus reducing the amount of HEAL principal that remains outstanding. Cancellation of HEAL disbursements in total, with the school returning the check to the lender within 120 days, will be applied as a refund to the principal amount of the HEAL loan. The lender will notify the Department and the Department will refund the insurance premium, which will also be deducted from the principal amount of the loan.
[42 CFR Parts 60.21, 60.52 and 60.54]
Regulations require institutions to develop and implement procedures related to disbursement receipt and release. These procedures, which must be documented and maintained by the school, must assure that the receipt and release functions are separately maintained from the application preparation and approval process. Further, the school must keep a record of the dates on which the following events occur for each HEAL loan check:
In addition, institutions must maintain either a photocopy of each HEAL check or draft, or a copy of a disbursement roster. If the school chooses to use disbursement rosters in lieu of photocopies, the rosters must include the information that appears on the check (i.e., name of lender, date of disbursement, name of borrower, amount of check, parties to whom the check was made copayable, check number, etc). After receiving a HEAL check for a student, the school must assure that the amount of the check does not exceed the approved total amount of the loan or the statutory maximums (see Chapter 3, Section 2, Loan Amounts) and that the borrower personally endorses the HEAL check; power-of-attorney is not acceptable. The school must maintain proof of disbursement (in an automated or manual format) for a period of 5 years from the last day of a HEAL borrower's attendance.
The school and the student are expected to endorse a HEAL check within 30 days of receipt of the check or draft, or released funds received by electronic transfer, with the school retaining its portion and disbursing the remainder to the student no later than 45 days after the disbursement date of the HEAL funds. Disbursements should not occur prior to enrollment unless the student has pre-enrollment educational expenses that must be met. However, good practice suggests that it is best to avoid pre-enrollment disbursements whenever possible in case the student ultimately does not enroll. In addition, HEAL regulations stipulate that canceled disbursements must be returned to the lender within 30 days of the determination that the student does not plan to enroll.
[Section 705(a)(2)(G); 42 CFR Parts 60.16, 60.52, 60.56 and 60.61]
The school must make sure that its HEAL student records are easily retrievable and safeguarded against fire, theft and tampering. Schools must maintain student records for not less than five years following the date the borrower graduates, withdraws, or fails to enroll as a full-time student. The Department of Health and Human Services permits institutions to maintain their records in a variety of formats at the option of the school. Record keeping formats include:
The contents of each student record must include 18 specific pieces of information, which the regulations itemize. These items are listed below:
Should an institution cease to participate in the HEAL loan program, it must continue to maintain all required HEAL records. If the school undergoes a change in ownership, the "successor" school still is responsible for maintaining the appropriate records. In addition, the school must provide the Department of Health and Human Services, the Comptroller General of the United States, or their representatives access to these records.
[42 CFR Parts 60.56, 60.59 and 60.61]
Schools must provide reports on the HEAL program as requested by the Department of Health and Human Services--including the Office of Health Education Assistance Loan Default Reduction. Copies of any report must be maintained in institutional files for at least five years after the school completes it, unless the Department directs the school to do otherwise.
In addition to providing information to the Department of Health and Human Services as requested, schools must also inform HEAL lenders--at the lender's request--of the name, address, postgraduate destination and other reasonable identifying information about HEAL borrowers.
[Sections 715(a)(6) and 715(b) of the Public Health Service Act; 42 CFR Part 60.57]
The Department of Health and Human Services expects institutions to assist in minimizing fraud and abuse in the HEAL program through adherence to statute, regulations, policy and good practice. When an institution finds indications of potential or actual commission of fraud or other offense against the United States, it must promptly contact the appropriate Regional Office of the Inspector General for Investigation for the Department of Health and Human Services.
[42 CFR Part 60.61]
All schools must comply with HEAL program requirements. Failure to comply with applicable statute and regulations and with the written agreement between the Department of Health and Human Services and the institution can result in liability by the institution to the Department for HEAL loans borrowed by its students that go into default. Exceptions can be made if the area of noncompliance is deemed not to have contributed to the default or to have prejudiced the Department's attempt to collect the loan from the borrower.
Note that almost all documents associated with the HEAL program, including the student application form, contain a statement with respect to any party's misrepresentation. Specifically, any person who knowingly makes a false statement or misrepresentation in a HEAL loan transaction, bribes or attempts to bribe a Federal official, fraudulently obtains a HEAL loan, or commits any other illegal action in connection with a HEAL loan is subject to possible fine and imprisonment.
[42 CFR Parts 60.1, 60.19 and 60.61]
The holder of a HEAL loan which was purchased while the borrower is still in school must inform the school--as well as the student--of the transfer of the loan's ownership within 30 days of the date the loan was purchased. Institutions that would like to be notified when loans for students who have graduated or left the institution are sold should discuss the matter with the appropriate HEAL lenders. While lenders are not required to notify institutions of the sale of HEAL loans after a borrower graduates or leaves the school, most lenders are interested in assisting schools help HEAL borrowers. In addition, the Department of Health and HumanServices provides each school with information annually on any borrowers who have attended the school. This information includes the names of the original lender(s) and the current holder(s) of the borrower's HEAL loans.
Note that a lender must notify the borrower and the Department of Health and Human Services every time a HEAL loan is sold, whether or not the borrower is still in school.
[42 CFR Part 60.38]
